Since May 12, Ether’s price has been struggling to sustain its $1,800 support level, as investors face pressures from a worsening crypto regulatory environment and the Ethereum network’s high gas fees. Also negatively impacting Ether’s (ETH) price are three indicators signaling reduced demand for its decentralized applications (DApps) and a lack of leverage buying demand from professional traders.
Regulators signal their plan to further limit crypto intermediaries
According to court documents filed on May 15, the United States Securities and Exchange Commission (SEC) has given a formal response in court in relation to Coinbase’s petition for clear crypto regulation. The SEC stated that any rulemaking may take years and that enforcement actions will continue in the meantime.
On May 16, the Economic and Financial Affairs Council of the European Union — comprising finance ministers of all member states — approved the highly anticipated Markets in Crypto-Assets (MiCA) regulation, which will come into effect by mid-2024.
Some argue that MiCA facilitates business growth in the region. Others focus on the privacy risks for personal users’ data and the risks imposed on non-custodial solutions, including decentralized finance applications.
The drop in DApp deposits is concerning
The Ethereum network is experiencing problems caused by surging gas fees — the cost associated with transactions, including those performed by smart contracts. For the past four weeks, the average transaction fee has stood above $9, which severely limited the demand for DApp usage.
Total deposits on the Ethereum network in Ether terms plunged to their lowest levels since August 2020. Such an analysis excludes the effects of native Ethereum staking, which recently started to allow withdrawals.
Ethereum network applications’ total deposits in ETH. Source: DefiLlama
According to DefiLlama data, Ethereum DApps reached 14.9 million ETH in total value locked (TVL) on May 16. That compares with 16.5 million ETH two months prior, a 10% decline. As a comparison, TVL on BNB Smart Chain in BNB (BNB) terms was essentially flat in the same…
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